"Mergers & Acquisitions & Complications Involving Government Contracts"

Richard Raleigh, Co-Chair of the Wilmer & Lee Government Contracts Practice Group, spoke at North Alabama Federal Bar Association's 49th Annual Acquisition Law Symposium in December 2021 on "Mergers & Acquisitions & Complications Involving Government Contracts".  A former U.S. Army Judge Advocate based in Huntsville, Mr. Raleigh frequently advises clients regarding the unique challenges facing businesses involved in federal government contracting.

Download "MandAPresentationRJRRDec2021.pdf"

A Burden Lifted - Hiring of Incumbent Workforce By Follow On Contractor - It Is Again Your Decision Who You Hire

The decision is again in the hands of the government contractor.  They can decide who best to fill the positions when they take over a contract.

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Employment Law for Growing Government Contractors

Congratulations, your business is growing and adding new employees every day!  However, as you grow, it seems your business becomes more complex, especially when it comes to meeting employer-employee relationship requirements. These rules and regulations are not terribly complicated (at least most of them are not), but they can be pitfalls for the unwary.

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Debunking the Hype Involving "Other Transaction Authority"

Tentative Draft No. 3 of Restatement of the Law Third, Torts: Liability for Economic Harm Approved

On Monday, May 21, 2018, at the Annual Meeting of The American Law Institute, the membership voted to approve Tentative Draft No. 3 of Restatement of the Law Third, Torts: Liability for Economic Harm. This membership approval marked the completion of Restatement of the Law Third, Torts: Liability for Economic Harm.  https://www.ali.org/annual-meeting-2018/daily-updates/monday-may-21/

Wilmer & Lee, P.A. attorney Richard Raleigh, a member of The American Law Institute since 2015, served on the Member Consultive Group for Restatement of the Law Third, Torts: Liability for Economic Harm, and was present at the ALI’s Annual Meeting in Washington D.C. for the vote.

Founded in 1923, The American Law Institute’s mission is to promote the clarification and simplification of the law and its better adaptation to social needs, to secure the better administration of justice, and to encourage and carry on scholarly and scientific legal work.

Alabama Enacts Data Breach Notification Requirements

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By:  Richard J.R. Raleigh, Jr., April 24, 2018

Alabama businesses need to take note.  A recently enacted law, the Alabama Data Breach Notification Act (No. 2018-396), creates new requirements for “covered entities” who have “sensitive personally identifying information” that is the subject of a “data breach.”  The Act mandates certain security measures for businesses and requires notification if a breach occurs.  Failure to comply can result in significant fines, and a violation of the Act is also considered a violation of the Alabama Deceptive Trade Practices Act (Alabama Code Sections 8-19-1, et seq.).

Data breaches can be significant and can have far reaching effects.  In 2015, the U.S. Department of Defense notified more than 20 million former and current government employees that their information was stolen in one of the largest cybercrimes ever carried out against the U.S. Government.  As a result, the Office of Personnel Management provided each of the affected individuals with identify theft protection and awarded a $133 million contract for identity theft protection services to pay for that protection.  Nearly everyone can recall the 2015 Experian loss of personal data for around 15 million individuals, a loss that included social security numbers.  And, the Target data breach involved as many as 70 million Target customers.  Recently, Saks Fifth Avenue joined the ranks of businesses that have been hacked and whose customers’ information was stolen.

These types of events led Alabama Senator Arthur Orr (R–Decatur) and Alabama Representative Phil Williams (R–Huntsville) to sponsor legislation to help protect the sensitive personally identifying information of Alabama citizens.  Senator Orr previously tried to get legislation related to data breach notification through the legislature.  This year, the Alabama Legislature passed the Alabama Data Breach Notification Act.  Governor Ivey signed the bill into law on March 28, 2018.  “Beginning June 1, 2018, private and public entities must establish reasonable data security measures and notify those affected when personal data has been compromised.  Any breached entity that determines the compromised information is reasonably likely to cause substantial harm must notify those affected as expeditiously as possible’but no later than 45 days after discovery.

The requirements of the Alabama Data Breach Notification Act apply to covered entities and to third-party agents.  These terms are defined:

(2) COVERED ENTITY. A person, sole proprietorship, partnership, government entity, corporation, nonprofit, trust, estate, cooperative association, or other business entity that acquires or uses sensitive personally identifying information.

(7) THIRD-PARTY AGENT. An entity that has been contracted to maintain, store, process, or is otherwise permitted to access sensitive personally identifying information in connection with providing services to a covered entity.

The Act protects "sensitive personally identifying information," which is an Alabama resident’s first name or first initial and last name, combined with one or more numbers or other data – such as a social security number, bank account number, medical information, or username and email address information.

The Alabama Data Breach Notification Act requires: (1) reasonable security, (2) investigations, and (3) notification under certain circumstances.

Reasonable Security Measures.  Covered entities and third parties are required to consider, implement, and maintain certain security measures.  The Act contains a list of certain measures that should be considered.  But, the statute explains that “[r]easonable security measures [are] security measures practicable for the covered entity to implement and maintain.” Factors like the size of the entity, amount of sensitive information, and cost of implementation of measures are considered when determining what security measures should be undertaken.  What constitutes “reasonable security measures” is likely to be the subject of debate in the future.

Good Faith and Prompt Investigation.  If a covered entity or third party determines there has been a breach of security in relation to “sensitive personally identifying information,” they have a duty under the Act to conduct a good faith and prompt investigation.

Notification.  When there is a data breach, covered entities and third parties must notify affected Alabama residents.  Unless an exception in the act applies, they must do so “as expeditiously as possible and without unreasonable delay.”  In any event, notification must occur no later than 45 days after the covered entity or third party determines a breach has occurred and is likely to cause substantial harm.  The Act sets forth the information required to be provided.  Furthermore, if more than 1,000 Alabama residents are affected, the Alabama Attorney General and consumer reporting agencies must be alerted.

Businesses should review the Act and seek guidance from experts to determine appropriate data security measures.  While there will be questions when data breaches occur, such as what are “reasonable security measures” and when is a loss “likely to cause substantial harm,” the Alabama Data Breach Notification Act attempts to provides answers - including recommendations concerning appropriate security measures - in addition to setting forth requirements.

Raleigh Speaks on Panel About Cybersecurity and Cyberlaw

Wilmer & Lee, P.A. Shareholder Rich Raleigh recently spoke at the Fall 2017 American Bar Association National Legal Malpractice Conference on Cybersecurity issues facing lawyers and their clients.  In the session entitled, "Ransomware Make You WannaCry?  Protecting the Confidential Information of Your Practice and Your Clients From CyberCriminals," Raleigh and the other panelists addressed recent cyber-attacks, cyber breach coaching, and reasonable steps to take to protect law firm and client information."  Rich serves on the ABA Standing Committee on Lawyers' Professional Development.  For more information about the American Bar Association's National Legal Malpractice Conferences, see https://www.americanbar.org/groups/lawyers_professional_liability.html

Myths That CEOs Tell Each Other – Part I: “You Can Order Employees Not To Discuss Their Pay With One Another”

Employee Benefits Policies.

Many U.S. businesses have a policy similar to the one below:

Confidentiality of Employee Benefits Information.

Employees are prohibited from discussing their benefits, including wage levels and other company benefits with other employees. This information is confidential and cannot be discussed in the workplace. Employees found to have violated this policy will be subject to disciplinary action, up to and possibly including termination.

If this looks familiar, you are not alone. Similar policies exist at companies across the country. The leaders of these companies might be shocked to learn that such policies are illegal. Section 7 of the National Labor Relations Act (29 U.S.C. §157) provides all employees the right to “engage in concerted activities,” including
the right to discuss their terms and conditions of employment with each other. This does not only apply in “union shops” or to government contractors. Section 8(a)(1) of the law makes it an unfair labor practice to deny or limit employees’ Section 7 rights.

For decades, the National Labor Relations Board (“NLRB”) has taken the position that employers cannot restrict employees from discussing their pay and benefits. The NLRB and courts agree these policies violate the NLRA.

The National Labor Relations Act.

Thus, under the National Labor Relations Act of 1935 (“NLRA”), workers have the right to engage “concerted activity for mutual aid or protection” and “organize a union to negotiate with [their] employer concerning [their] wages, hours, and other terms and conditions of employment.” While some employers seem to understand that they can’t fire employees simply for talking about pay (which you cannot do), they do not know that it is also illegal to discourage employees from discussing their pay with each other.

In spite of the clarity of the law, companies continue to create rules prohibiting discussions of pay and benefits. A recent report from the Institute for Women’s Policy Research found that about 1⁄2 of U.S. employees are either explicitly prohibited or strongly discouraged from discussing pay with others at their place of employment.

Why Do People Do It If It Is Illegal?

Given their illegality, why are such policies common? Ignorance of the law is a large part of it. Employees simply don’t know that their employer’s policy is illegal. Unfortunately, some employers don’t either, but ignorance of the law in this case is no excuse. When an employee does become aware of their rights – sometimes after a termination action, they file suit under the NLRA, beginning a long and expensive process for their former employer. Among those workers who are aware of the NLRA, many think that it protects employees in “union shops,” but no one else, which is incorrect.

Employers create policies against discussing benefits because they believe that if their employees discuss their pay with one another, then workplace tension will result. But, there is a real question about which is worse – knowing others are getting paid more, or the dissatisfaction (reduction in morale) employees might have when they learn that their employer is giving them orders that clearly violate the law.

Is There Nothing We Can Do?

There are some limits concerning the NLRA and the rules against discussions of benefits among employees. One is the manner in which employees exercise their rights. While workers have the right to have such conversations, employers can require the employees to have them at times other than when they are supposed to be doing their work. In such cases, an employer cannot single out discussions about pay and permit other “non-work” discussions. For example, if you prohibit discussions of pay and benefits during working time, you should prohibit discussions of Girl Scout cookie sales too. Have a consistent rule that “non-work” discussions take place only on breaks and other non-working times. Permitting discussions of other topics unrelated to work, while prohibiting discussions of benefits will be considered evidence of intent to violate employees’ NLRA rights.

Employers can actually limit the content of such discussions where privacy rights under HIPAA, the ADA, or other laws apply. In short, employers can prohibit employees from discussing third party’s confidential information related to medical conditions, for example.

How the workers obtain the pay and other benefits information is also a consideration. Workers can discuss their pay and benefits with others, and co-workers can provide their own information in discussions. But, if workers get the information by gaining access to restricted areas or the like, then not only will they not be protected by the NLRA, they could suffer other consequences.

Practically Speaking.

You should not have a blanket prohibition against discussing salary, wages, and employee’s benefits. Discuss with your legal counsel any concerns you have about the manner and content of discussions and confidentiality of employee benefit information. You may have general discussions with your employees about working during working time, but don’t single out discussions of wages or make threats of termination.

Many forward thinking companies make it easy for their employees to learn about how their benefits stack up with their competition. They have decided that when they are open about pay and benefits, their workers feel they are part of the team, it
increases employee morale, and it promotes teamwork across the organization.

Don’t simply find some form policy on the internet and use it. This is the first in a series of “myths” and these myths are perpetuated by business leaders giving one another bad advice. Some employers draft their own policies, without doing the research necessary to ensure the policy complies with the law. Would you prepare your business plan in such a manner? There are so many counterintuitive things in the area of employment law – if you don’t get good advice you can find yourself in an expensive lawsuit even when you think you are doing everything right.

Alabama’s New Non-Compete Law

Alabama’s New Non-Compete Law Should Provide Clarity to Employers and Employees

By:  Richard J.R. Raleigh, Jr.

On January 1, 2016, Alabama’s non-compete law will receive its first real update in years.  I was honored to be a part of the group that drafted the update.  Alabama Code Section 8-1-1 is entitled, “Contracts restraining business void; exceptions,” and it defines what types of covenants not to compete will be enforced, and how they will be enforced.  The New Section 8-1-1, passed by the Alabama Legislature this past session and signed by Government Bentley on June 11, 2015, was the result of years of work by a committee of the Alabama Law Institute, a legislative agency that operates with volunteers whose goal is to clarify and simplify the laws of Alabama, to revise laws that are out-of-date, and to fill in gaps in the law where there exists legal confusion.

The main goal of the update was to take the existing statute, along with the multitude of cases that interpreted the law, and clarify things for employers and employees.  In the past, the lack of clarity has made it difficult for employers and employees to determine in advance whether the agreements they entered into would actually be enforced by a court.  The result was many hundreds of lawsuits.  The existing general proposition is unchanged – “Every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind otherwise than is provided by this section is to that extent void.”  However, the update to Alabama Code Section 8-1-1 lays out the exceptions (six of them) that presently can generally be found only by going through the facts of the appellate court decisions that interpret the present act.  For example, non-competes are permitted when the party “holds a position uniquely essential to the management, organization, or service of the business” and when someone sells a business they can agree with the buyer to not carry on or engage in a similar business inside a designated geographic area.  They are subject, however, to restrictions concerning time and place.

Another place the New Section 8-1-1 adds clarity is in defining that “[r]estraints of one year or less are presumed to be reasonable.”  This presumption may be rebutted.  But, whereas employees, employers, and lawyers previously had to sift through hundreds of cases to try to guess whether a time period in an agreement might be later determined by a court to be “reasonable,” now they can be confident that on most occasions, a non-compete of a year or less will not be struck down because of the time period (although it must still meet other requirements, such as being reasonable in terms of geographic scope and being tied to a protectable interest).

The New Section 8-1-1 also declares that one may be contractually bound to not solicit customers of an ongoing business, subject to reasonable time restraints, clarifying that non-competition and non-solicitation agreements are to be treated similarly.  This is not something that has been clear previously, if one reviews the numerous appellate court decisions in this area.

Whether there was a “protectable interest” sufficient to warrant the restraints of a non-compete is a frequently litigated issue.  The recently passed and signed update to 8-1-1 adds some clarity, setting forth several things that qualify as a “Protectable Interest.”  These include trade secrets, confidential customer lists, confidential commercial data, relationships with clients and customers, and specialized training (although not simply job skills).  With regard to “training,” the ALI committee again intended to follow the course and theme of existing case law, which in this case differentiates between specialized training that an employer pays for, which may give rise to a protectable interest, and regular on the job skills and on the job training, which in and of themselves do not usually give rise to a protectable interest.

While the burden remains on the party seeking enforcement to prove each requirement, it is clear under the new law that an employee or other party resisting the non-compete agreement contract has the burden of establishing there is an “undue hardship” if they raise that defense.  Previously, there has been debate as to whether the party seeking enforcement had the burden to essentially prove a negative – that the party restrained does not have an undue hardship.  Again, the new statute adds clarity.

“Professionals” may not be restrained by non-compete agreements, both under the old and new 8-1-1.  Doctors, Lawyers, Certified Professional Accountants, Veterinarians, and Licensed Physical Therapists have been recognized as professionals exempt from such restraints on trade.

Many non-compete agreements contain language asking a court to essentially rewrite an agreement if the court decides it is unreasonable or overbroad because it is too long or the geographic area of restraint is too large.  This language is called “blue pencil language.” New expressly permits a judge to redraft the agreement to comply with the goals of the parties as much as possible while still limiting restraints to reasonable amounts.

Finally, with regard to remedies available if a party breaches a non-competition agreement, the new law provides that a prevailing party may get an injunction and other appropriate equitable relief, actual monetary damages suffered because of the breach, liquidated damages (if the agreement provides for these), other remedies available under existing contract law, and costs of litigation and attorneys’ fees (again, if the agreement provides for these).  Prudent employers will review their agreements to ensure those agreements provide for recovery of fees and costs if they have to enforce an agreement in court and prevail.

In short, New Section 8-1-1 of the Alabama Code codifies many of the rules and requirements set out in appellate court decisions interpreting Alabama’s non-compete statute.  Hopefully, the new law will help businesses and individuals in Alabama better understand what they may ask of others and what may be asked of them with regard to restraints on trade.  Before the new act goes into effect on January 1, 2016, employers in particular should review their current agreements and decide, particularly given the rebuttable presumptions regarding time periods, whether they should update or revise their agreements.

About the author: Richard J.R. Raleigh, Jr.  is an attorney and shareholder with Wilmer & Lee, P.A., a law firm with offices in Huntsville, Decatur, and Athens that represents businesses, individuals, and governmental entities throughout the Southeast.  He is presently the President of the Alabama State Bar.  Rich is also a member of the Alabama Law Institute and served on the committee of the ALI that drafted the new non-compete law and the committee comments to the new law.
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